Market risk is also the uncertainty in the future value of the bank’s on-balance sheet and off-balance sheet financial items resulting from interest rates, foreign currency, equity, and commodity risks. The Asset Liability Management Committee (ALCO) serves as the primary oversight and decision making body that provides strategic directions for the bank’s management of market risk. The key elements in the market risk management framework are principles and policies, risk limits and risk measures. The prescribed approach for the computation of capital charge for market risk is very simple and thus may not be directly aligned with the magnitude of risk. Likewise, the approach only incorporates risks arising out of adverse movements in exchange rates while ignoring other forms of risks like interest rate risk and equity risks. NIBL has taken measures to address these various forms of risk and at the same time perform stress tests to evaluate the adequacy of capital using internal models for the measurementof market risk.

Important Risk Management measures of the bank to address Market Risk includes:

A pro-active Asset Liability Management Committee (ALCO) that meets on a weekly basis.

Review of ALCO decisions by top Management and Board of Directors.

Conduction of gap analysis, timely re-pricing of products and hedging of exposures.